In light of the rapid economic shifts and global fluctuations affecting funding and charity work, the essential question occupying the minds of nonprofit leaders around the world can no longer be ignored: How can one lead steadfastly amidst this turmoil?

“What Keeps Nonprofit Leaders Up at Night — and How Can They Lead Amid Challenges”,

which reviews the key concerns facing nonprofits, from economic pressures and declining government support to changing donor behavior, while providing practical insights to help leaders navigate this phase with confidence and efficiency.

In this context, the Third Bank Platform | Knowledge Enrichment Encyclopedia for the Nonprofit Sector publishes a complete literal translation of an analytical article published by NonProfit PRO titled:

The past few months have been filled with challenges for nonprofits — no matter what angle you look from. There are many issues that require close monitoring in every aspect, which is why NonProfit PRO conducted interviews with a group of experts from various fields within the nonprofit sector, to hear their views on the current climate and understand what nonprofits can do to prepare themselves for success.

The Economic Impact on Philanthropy

One of the primary issues on everyone's mind is the economy.

Sutanto Widjaja, Senior Vice President and Wealth Advisor at Farther, states that volatility is the hallmark of the economy.

We have gone through periods of volatility during the COVID-19 pandemic, in 2022 when the stock market collapsed, as well as during the dot-com bubble burst in the 1990s, and other times throughout history.

Unlike those previous periods, this phase is characterized by a long-term decline in government support.

Widjaja said: “In an environment where you receive a notice no more than one week before funding is pulled, many nonprofits find themselves forced to act chaotically and urgently.”

Widjaja, who also serves on investment committees for several nonprofits, noted that inflation is one of the most significant economic factors facing nonprofits today.

He illustrated with an example: “In one of the boards I am part of, we recently received a quote to insure our assets and organizational buildings, and the quote was 100% to 200% higher than last year's quote... So, inflation is clearly a top-of-mind issue.”

In conjunction with the issue of inflation, the future prospects for endowments affiliated with nonprofits appear unstable. While Widjaja pointed out that these funds were created to support organizations permanently, market fluctuations mean that some endowments may not achieve the typical return of 5% above inflation, known as the Consumer Price Index (CPI) + 5%.

He clarified: “What this means is that these endowments will gradually decrease in value over time mathematically, as they are being depleted at a faster pace than their ability to grow or appreciate in value.”

Most endowments rely on the Yale Endowment Method, which is based on investing in private assets — such as private equity, venture capital, infrastructure, real estate, and others — which are assets that have historically outperformed public assets within the investment portfolio. However, due to the current period of volatility, Widjaja noted that nonprofits may begin to completely rethink how they manage their endowments and investments.

Government Actions Targeting Nonprofits

Bob Carter, a certified fundraising professional (CFRE) and the head of Carter Consulting in the field of fundraising and governance, stated that sudden disruptions following a period of stable funding raise increasing concerns among nonprofits.

Carter said: “Uncertainty generates a tremendous amount of fear. For example, even in a job situation when you know you will lose your job, you can take action and make a move, but when you don’t know your fate and love what you do, you tend to hold on and keep trying, but you may not be effective enough because you are unsure of what will happen in the future.”

Additionally, nonprofits are concerned about a bill currently circulating in Congress that could impose billions of dollars in taxes on nonprofits, raising fears of it potentially becoming a reality. In light of President Donald Trump’s threats to revoke Harvard University’s tax-exempt status, some organizations may worry they might be next on the list. Carter clarified that the idea of revoking tax-exempt status is not new, as health systems and nonprofit hospitals have faced this type of scrutiny in the past, but he does not believe that most nonprofits should currently worry about it.

Carter said: “We are not talking about [service organizations]; I don't believe any of them are threatened in any way, because they are essentially living on the edge — every cent they get is directed straight to services... What the government is targeting is what is viewed as a gross misuse of 501(c)(3) status to accumulate vast wealth for the organization. That’s a completely different situation.”

While there are several ways that nonprofits may lose their tax-exempt status, all of them are related to violations on the part of the organization itself. During her testimony before the House Subcommittee on “Government Efficiency Oversight,” Diane Yentel, President and CEO of the National Council of Nonprofits, urged organizations to focus on their core mission and avoid getting distracted by surrounding threats to the tax-exempt status of any nonprofit.

She said during the hearing held on June 4 regarding Nonprofit Accountability: “It is illegal for the President or any Executive Office member to direct the IRS to make any changes to the tax status of any individual or organization. In fact, the law clearly states that if the President threatens to revoke the tax-exempt status of a particular organization, he can be charged and punished with up to five years in prison.”

The Reality of Donor Behavior

Widjaja said that donors are reacting to the volatile situation in different ways; some high-net-worth individuals — who hold most of their wealth in assets like the stock market — have become hesitant to make large donations. He explained that this is not surprising, as volatility is closely linked to donor hesitance.

He said: “Nonprofits may have commitments from donors — long-term or multiple-year commitments — but every time the market experiences volatility, the donor may defer their commitment, or in some cases that I've witnessed personally, cancel their commitment altogether.”

Another factor affecting high-net-worth donors is the increased demand for donations from a growing number of potential organizations — meaning they have to carefully choose which causes to support. Additionally, as wealth shifts from the current generation of devoted donors to their heirs, there is no guarantee that the next generation of donors will maintain the same levels of giving, or even adopt the same charitable goals that their parents embraced.

Mike Esposito, a certified fundraising professional (CFRE) and Founder and CEO of Strategy at Mike Esposito Fundraising, stated that high-net-worth individuals are not the only ones changing their behavior. Small donors have started to reduce their contributions, while donors who have been accustomed to making larger donations — and thus have a stronger relationship with the beneficiary organization — have begun to increase their donations.

Esposito added that some funding organizations have already begun to increase their giving levels as well.

He said: “There is a list of over 80 funding organizations that have taken the initiative at this time to increase their giving levels. These organizations typically commit by law to provide a minimum of 5% of their funds annually, but some have begun to give 6%, and some even up to 10%. There are also organizations — as recently announced — that plan to use all their funds over the next ten or fifteen years.”

Widjaja noted that as a positive aspect, there are no indications yet of a slowdown in corporate donations, which is partly attributed to the fact that companies have already allocated their charitable budgets for this year. He added that pulling back from previously committed funding would make companies look bad in front of the public.

Widjaja said: “That would not only negatively impact the reputation of companies, but it would also raise concern on Wall Street, as investors would wonder, 'What happened to them? They cancelled a $50,000 commitment!'”

Carter mentioned that in the bigger picture, some donors have started to shift from supporting global causes to focusing on local issues closer to home, while others seek to fill gaps on an international level. He added that this shift resembles a pendulum movement that swings back and forth over the years he has spent in this sector.

Carter said: “I believe there is a balance that needs to be struck here, rather than leaning too far to one side; there are periods when people are less willing to support international charities and prefer to focus on what relates to their countries. Here emerges what could be termed the 'charity begins at home' mentality. I see this trend not being very evident among the top-tier major donors but much more apparent — almost very real — in the middle and lower levels of donors.”

What Can Nonprofits Do?

Although many things seem uncertain for nonprofits, there are many aspects that are still within their control.

Carter said: “I often say you have 30 to 60 minutes to be angry about something. You can worry, feel helpless, or even cry, but after that, you need to start preparing for the upcoming new reality.”

Widjaja offered practical advice for nonprofits:

  • Create Plans for Potential Scenarios: Managing your organization’s assets in a way that prepares it for various possibilities can help maintain a sufficient and stable cash flow.
  • Control Expenses: Widjaja emphasized that controlling expenses is crucial, especially for organizations facing uncertainty in funding.
  • Expand the Donor Base: Despite the fatigue and hesitation experienced by some donors, it remains possible — and indeed necessary — to attract new donors and retain them. He noted that engaging younger donors in particular will help the organization build a long-term donor base.

From a fundraising perspective, Esposito sees there are many opportunities available, with the most important being — as he says — the continued relentless solicitation for support.

Esposito said: “If you're facing real difficulties, reach out to the loyal donors you've come to rely on. Inform your board, communicate with major donors, and let them know the challenges your organization is facing at this time, because it truly is an unprecedented time.”

Regarding searching for grants and other funding opportunities, diligence and persistence are key to maximizing the efforts made. This includes everything from focusing funding requests on opportunities that align with the organization's mission to building strong relationships with potential donors.

Esposito also urged to embrace new and emerging strategies, such as welcome donations from Donor-Advised Funds (DAF) and utilizing generative artificial intelligence (AI) to help save time and direct it towards higher value activities, like major gift cultivation and engaging corporate sponsors.

He also stressed the importance of supporting the well-being of nonprofit employees, so they can perform and grow better in the workplace.

Esposito said: “Just looking at the impact that layoffs have had in this sector, and the increasing pressures on charitable funds, which are causing immense stress on fundraising staff — all of this makes it essential to ensure their well-being and check in on them continuously.”

Despite the multiple challenges facing the nonprofit sector, Carter believes that the current moment is the right time for leaders to step up and show their true leadership capabilities.

Carter said: “That’s why we need leaders to hold the helm firmly — whether they are the CEO, board chair, or any other official — to keep the ship on course as much as possible. Sometimes, that does not mean sailing directly into the wind, but rather leaning slightly in this direction or that. Some say, 'We'll hold on and drop the anchor,' but do you know what happens if you drop the anchor during a storm? The waves will pull you down because you're tied to the bottom. You have to move with the current and sway with the waves to survive the storm.”

These insights confirm that leading nonprofits during times of turmoil requires more than just managerial skill or financial planning; it necessitates a deep awareness of the context and an ability to adapt to reality without compromising the mission. An effective leader is one who reads the signs of change early, balances the demands of sustainability with the needs of the community they serve, and possesses enough courage to lead change rather than wait for it to occur.

While the economic and funding challenges may seem complex, building resilient strategies, diversifying income sources, and focusing on human capital are real pillars for ensuring the impact persists and giving continues. The future will not belong solely to those who are better funded but rather to those who are more aware, innovative, and capable of converting crises into growth opportunities.